Prior Appropriation System Adopted in Utah

As part of its responsibility to the public over water in Utah, the State has adopted the “prior appropriation system—a capture system of water allocation—to maximize productive usage of water.” Through Utah’s prior appropriation system, those wishing “withdraw water from the natural environment” are required apply to the Utah State Engineer. In the application to the State Engineer, potential water users must include: “the nature of the proposed use,” the “quantity of water in acre-feet,” “the time during which it is to be used,” “the name of the stream or other source from which the water is to be diverted,” “the place on the stream or source where the water is to be diverted and the nature of the diverting works,” and any “other facts that clearly define the full purpose of the proposed appropriation.”

However, an appropriation by the State Engineer “may be made only for a useful and beneficial purpose.” Thus, the State Engineer “must ensure that the waters of the state are used by appropriators in accordance with their priorities and that diverted waters are used for proper beneficial purposes.”

Change Applications Under Utah Law

Once a potential user obtains the right to use unappropriated water, “a water right holder is entitled to change the point of diversion or the place or nature of use of water so long as vested rights are not impaired by the change.” In order to exercise the right to change the point of diversion or the place or nature of use of water, a water user must file a change application with the State Engineer. Under Utah law, the State Engineer is required to “follow the same procedures . . . for applications to appropriate water and applications for permanent changes of point of diversion, place of use, or purpose of use.” More specifically, the Utah Code “requires the State Engineer to approve a change application unless it impairs any vested [water] right without just compensation.”

Even still, the Utah Supreme Court has explained that water right owners have a vested right to the “quality as well as the quantity which he has beneficially used.” Thus, while there is a presumption in favor of approving change applications, the “State Engineer must first determine that the proposed changes will not impair any vested [water] right to the beneficial use of a certain quality and quantity of water.”

Even though the State Engineer is authorized to determine whether a change application should be approved, “a person aggrieved by the State Engineer’s decision may obtain judicial review in accordance with Title 63G, Chapter 4, Administrative Procedures Act.” As part of a district court’s review, the court “is not sitting in its capacity as an adjudicator of rights, but is merely charged with ensuring that the state engineer correctly performed an administrative task.” Furthermore, in its review of the State Engineer’s decision, a “district court may only consider issues ‚subject to determination by the [State] Engineer because the effect of the court’s judgment is the same as it would have been if the Engineer had reached the same conclusion in the first instance.” Thus, the district court “stands in the same position as the State Engineer,” and may only review those “issues determined by the State Engineer.”

Green River Power Plant Project’s Need for More Water

In HEAL, the Kane County Water Conservancy District and the San Juan County Water Conservancy District had for some time leased their existing water rights to Blue Castle Holdings Inc. “for the propose development of a nuclear power plant near” Green River, Utah. Because the proposed nuclear power plant project “will require the continuous depletion of nearly all of the Districts’ apportioned water to create steam to generate power and to cool the power plant,” The water conservancy districts and Blue Castle sought “to move the Districts’ approved points of diversion from several small tributaries to a single location on a larger river upstream from the existing points of diversion.”

The Change Applications at Issue

In January 2012, the State Engineer approved two change applications as it related to the existing water rights of the Kane County Water Conservancy District and the San Juan County Water Conservancy District. San Juan County Water Conservancy District’s change application “proposed to change the point of diversion from the smaller San Juan River to the Green River in Emery County, Utah.” San Juan County Water Conservancy District’s change application “also proposed that San Juan County Water Conservancy District’s water would be stored in a new reservoir and be used for the Project.”

Kane County Water Conservancy District’s change application proposed a change not only in the point of diversion, but also in the nature of the water use. Kane County Water Conservancy District “holds rights to 29,600 acrefeet of water from Wahweap Creek and Lake Powell in Kane County, Utah, for steam generation in the abandoned Kaiparowits Power Project.” In its change application, Kane County Water Conservancy District “proposed to use its water rights to aid in producing nuclear power for the [power plant] [p]roject,” and “[r]ather than diverting the water from Lake Powell, the Kane County Water Conservancy District proposed to divert the water from the same location proposed by the San Juan County Water Conservancy District in the Green River.”

HEAL Utah Challenges State Engineer’s Approval of Change Applications

Following the State Engineer’s advertisement of the Districts’ change applications, “nearly fifty protests were filed against the Kane County Water Conservancy District’s application and close to thirty protests [were filed] against the San Juan County Water Conservancy District’s application.” Even still, the State Engineer ultimately approved both change applications.

HEAL Utah, a Utah environmental protection group, sought judicial review of the State Engineer’s decision to approve the two change applications in district court. The two cases were consolidated, and a bench trial was held in September 2013. Following the bench trial, the district court ruled in favor of the Districts and Blue Castle, upholding the State Engineer’s decision to approve the change applications. HEAL Utah subsequently appealed.

HEAL Utah’s Three Challenges on Appeal

On appeal, HEAL Utah argued that the district court erred when it approved the change applications because the applicants had “not satisfied the burden of demonstrating the Change Applications meet the” necessary statutory requirements. Specifically, HEAL Utah argued that: “(1) there is no unappropriated water in the proposed source, (2) the proposed diversion will have an unreasonable impact on the natural stream environment and is contrary to the public welfare, and (3) the proposed change is not feasible and is speculative.”

Utah law sets forth that a change application should be approved if “there is reason to believe” that “there is unappropriated water in the proposed source,” “the proposed use will not impair existing rights or interfere with the more beneficial use of the water,” the proposed plan is “physically and economically feasible” and “would not prove detrimental to the public welfare,” and “the applicant has the financial ability to complete the proposed works.”

Utah Court of Appeals Rejects Contention that Green River is “Overapportioned”

In addressing HEAL Utah’s first contention, that there is no unappropriated water in the Green River and therefore the water rights upon which the change application is based do meet the requirements of Utah law. There, the court of appeals rejected HEAL Utah’s argument that the Green River is “overapportioned.” “HEAL Utah’s argument ignores the fact that the Green River and its tributaries form an interconnected system of which the Flaming Gorge Reservoir is only a part,” the court of appeals noted. “HEAL Utah’s evidence and experts were unable to demonstrate the extent of impact the diversions would have on the fish or the stream.”

HEAL Utah’s Briefing Deemed Inadequate on Several Points

Turning to HEAL Utah’s next contention, the court of appeals determined that “there is reason to believe the proposed changes will not unreasonably affect public welfare and the natural stream environment.” The court concluded that “HEAL Utah has failed to meet its burden of persuasion on appeal.” The court said that while “[m]ere probabilities and speculative evidence may be sufficient to challenge a change application … HEAL Utah has not actually challenged the district court’s factual findings … [and] cites no legal authority to support its arguments, and offers no references to the parts of the record on which it relies.” The court of appeals made similar statements in regards to certain of the other arguments raised by HEAL Utah.

Utah Court of Appeals Says, Although Project is a “Risky Venture,” the Applicants Presented Enough Evidence it was Both “Physically and Economically Feasible”

Finally, the court of appeals addressed HEAL Utah’s contention that “the proposed beneficial use of water—supplying a currently unbuilt nuclear power plant—is neither financially feasible nor anything more than a purely speculative use of water.” The court of appeals determined that “although the Project is a risky venture and has not yet been licensed through the Nuclear Regulatory Commission, the Applicants presented evidence that the Project is both physically and economically feasible.”

Similarly, the court rejected HEAL Utah’s argument that the power plant project is speculative or that the change applications attempt to create a monopoly over future water use. According to the court of appeals:

But here, there are contracts in place assigning the Districts’ current water rights to Blue Castle. Although Blue Castle does not intend to build the power plant without the assistance of other entities, the purpose and use of the water is clearly defined—it will be used for the generation of nuclear power. Unlike the applicants in Western Water, Blue Castle has proposed a site for the plant, invested money to develop the plant, and offered a detailed description of the purpose for the water and specific amount of water needed. This enormous risk and detailed plan for the nuclear plant demonstrates that Blue Castle’s interest in obtaining this water is not merely speculative.

HEAL Utah Will Review Ruling Before Deciding to Appeal Further

In a press release, Matt Pacenza, executive director of HEAL Utah, said the group is “disappointed” by the ruling, but still optimistic. “Utahns opposed to the project shouldn’t worry. This remains a project which has failed to attract investment or interest from any utility,” Pacenza said. “If no one wants to fund your project, or buy the product you’re selling, then you’re going nowhere.” HEAL Utah said it will review the court of appeals’ ruling before making and decision about whether to appeal to the Utah Supreme Court.

In its opinion, the court of appeals, noted several weak spots in HEAL Utah’s original filing, which may impact any further appeal. The court’s opinion sets forth that “[o]ur analysis of HEAL Utah’s arguments is limited because its arguments are often inadequately supported and briefed. In response, Pacenza has acknowledged that their appellate brief could have been stronger. “We developed some issues with our counsel late in the process,” he said. “We didn’t present as strong a case as we had hoped. But we still believed these critical issues should be heard by the court.”

Water Conservancy Districts and Blue Castle Rejoice in Victory

Conversely, the water conservancy districts and Blue Castle rejoiced in their victory. “”We have believed in this project since the beginning and yet another court has agreed with us,” said attorney David Wright, who defended the state engineer’s decision. “We are pleased with the outcome.” Blue Castle’s Aaron Tilton, a former Utah lawmaker, said the company is sifting through contractors and plans to begin site preparation work at Green River in about two years. “Our project has been scrutinized at many levels, including the state engineer, the district court and now the appeals court,” he said. “We have fully complied and satisfied all the requirements of the law and we can assure the public the level of scrutiny that has been applied to the process is welcomed.”

Under the Utah Code, “[a] person aggrieved by an order of the state engineer may obtain judicial review in accordance with [the Utah Administrative Procedures Act]” and section 73-3-14. However, whether an aggrieved person has standing to seek judicial review of an order of the state engineer requires reference to not only Utah Code section 73-3-14, but the Utah Administrative Procedures Act (“UAPA”) as well.

In, Utah Alunite Corp. v. Jones, the Utah Court of Appeals was faced with determining whether the Utah Alunite Corporation (“UAC”) and the Utah School and Institutional Trust Lands Administration (“SITLA”) had standing to seek judicial review of a decision of the Utah state engineer, which approved the application of the Central Iron Water Conservancy District … to appropriate water in the remote Wah Wah Valley in west-central Utah. The appellate court held that “[b]ecause SITLA and UAC, although aggrieved persons, did not become aggrieved parties under [UAPA] in this proceeding, they lack standing, and we dismiss their appeal.”

Competing Applications

In October 2006, the Central Iron County Water Conservancy District filed an application to appropriate water in the Wah Wah Valley. In the following weeks, the Utah state engineer published notice of the conservancy district’s application as required by law. In response, approximately 300 protestants filed petitions objecting to the conservancy district’s application. However, SITLA, a substantial landowner in the valley from which the water was to be appropriated, failed to file an objection.

Then, almost six years after the objections were filed, in August 2012, while the state engineer was still considering the conservancy district’s application, SITLA and UAC, jointly filed a competing application to appropriate water in the Wah Wah Valley. Soon thereafter, the conservancy district filed a protest to the joint application.

State Engineer Rules Appellant’s Water Rights are Subject to District’s Senior Rights

After almost two more years passed, in May 2014, the state engineer finally issued a decision regarding the competing applications. The state engineer granted both the conservancy district and SITLA and UAC the water rights they had applied for. However, the grant to SITLA and UAC was made “subject to the [Water] District’s senior right.” SITLA and UAC saw the state engineer’s decision as essentially denying their application, given the fact that the state engineer had given higher priority to the conservancy district’s grant. As a result, SITLA and UAC sought judicial review of both of the state engineer’s order.

District Court Lacks Subject-Matter Jurisdiction

As it relates to the state engineer’s decision addressing the water rights of the conservancy district, the lower district court determined that it lacked subject-matter jurisdiction because SITLA and UAC were not parties to the informal adjudication of the conservancy district’s application. The district court also determined that it lacked jurisdiction because SITLA and UAC had not exhausted their administrative remedies by either timely protesting or seeking to intervene. According, the district court dismissed SITLA and UAC’s petition. SITLA and UAC appealed.

On appeal, SITLA and UAC argued that Utah Code section 73-3-14 was the “alpha and omega of standing to seek judicial review of an adverse decision of the State Engineer.” The appellate court disagreed, finding that a determination of standing for purposes of seeking judicial review of an order of the state engineer required reference not only to section 73-3-14, but also to the UAPA, as section 73-3-14 explicitly sets forth. Therefore, the Court of Appeals determined that “there are two essential requirements for achieving standing to obtain judicial review of a decision made by the State Engineer.”

Two-Part Analysis for Determining Standing

First, a party wishing to seek judicial review of an order of the state engineer must be an “aggrieved person” for purposes of section 73-3-14. Under the statute, an aggrieved person is an interested person with an “actual or potential injury” resulting from the state engineer’s decision. Second, even if a person is an “aggrieved person,” that person must also be a party. Thus, in the words of the court:

[A]lthough a person may be negatively impacted by a decision from the State Engineer that is adverse to his or her interests—and thus be “aggrieved” in a general sense—that person does not have standing to seek judicial review unless he or she becomes a party, pursuant to UAPA, in the proceeding sought to be reviewed.

The court pointed out that the terms “aggrieved person” and “aggrieved party” are not co-extensive terms under the UAPA. Under the UAPA, a “person” is “an individual, group of individuals, partnership, corporation, association, political subdivision or its units, governmental subdivision or its units, public or private organization or entity of any character, or another agency,” while a “party” is “the agency or other person commencing an adjudicative proceeding, all respondents, all persons permitted by the presiding officer to intervene in the proceeding, and all persons authorized by statute or agency rule to participate as parties in an adjudicative proceeding,” Therefore, only those members of the broader group of “aggrieved persons” who become “aggrieved parties”, i.e., those who commence an adjudicative proceeding, or are respondents in that proceeding, or are permitted by the state engineer to intervene or are otherwise authorized by statute or agency rule to participate as parties to participate in adjudicative proceeding have standing to seek judicial review.

As it related to SITLA and UAC, the Utah Court of Appeals determined that “[t]here is no question that [SITLA and UAC], although parties in their own parallel administrative proceeding, were not parties to the adjudicative proceeding commenced by the Water District’s application under UAPA.” “Therefore, although [SITLA and UAC] are aggrieved persons, they lack standing because only persons that are both aggrieved and qualify as parties—aggrieved parties—have standing under section 73-3-14 and UAPA to contest a decision of the State Engineer.”